Latest statistics from the Office for National Statistics show a ‘worrying rise’ in the proportion of private sector workers saving just the legal minimum into a workplace pension, Royal London has warned.
The latest report of the Annual Survey of Hours and Earnings (ASHE) for 2016 found that the percentage of workers saving ‘more than 0% but less than 2%’ of their pay into a workplace pension has risen to 42%, compared with 40% a year earlier.
Under the government’s automatic enrolment scheme, participating employees are currently obliged to contribute just 1% of their pay into a pension, with a further 1% contributed by their employer. As more and more small firms are enrolled, the proportion making the legal minimum contribution is likely to continue to rise and could easily be a majority of all workers by 2018 when all firms have met their legal duties.
Steve Webb, director of policy at Royal London, said: “The way things are going, by the time automatic enrolment is complete, around half of all private sector workers will be paying at or around the statutory minimum level of contributions. Even when the statutory minimum rises to 8%, this is still far too little for most people on average earnings or above to have an acceptable standard of living in retirement.
“Millions of people face a disappointing retirement unless the government takes action to get contribution rates up. The 2017 review of automatic enrolment provides an ideal opportunity to address this issue as a matter of urgency, rather than kick it into the long grass.”